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Brocade reduces Foundry Networks buyout bid

Networking company revises its offer price for the switching and routing provider to $2.6 billion. And Wall Street appears encouraged that the deal is alive.

Dawn Kawamoto Former Staff writer, CNET News
Dawn Kawamoto covered enterprise security and financial news relating to technology for CNET News.
Dawn Kawamoto

Shares of Foundry Networks soared more than 17 percent in premarket trading Thursday, after the company announced last evening that its merger with Brocade was still alive but at a lower purchase price.

Under the revised agreement, Brocade reduced its purchase price for the Santa Clara, Calif.-based switching and routing provider to approximately $2.6 billion from its initial agreement of $3 billion. Foundry shareholders are entitled to receive $16.50 a share in cash for every share of the company they own, verses $18.50 a share in cash and 0.0907 shares of Brocade common stock in exchange for each share of Foundry common stock under the prior agreement.

Foundry shares rose as high as 17.8 percent, to $15.32 a share, in premarket trading, giving its stock a much needed lift after it suffered a blow last week, when the company adjourned its special shareholders meeting to vote on the initial deal.

At the time, Foundry's shares plummeted 26 percent, to $12.67 a share, when the company adjourned its meeting on Friday and rescheduled it for Wednesday. The company's proxy allowed for an adjournment of the meeting if it failed to get enough shareholder votes.

The companies, however, have pushed back the special shareholder meeting to November 7, in order to allow time to finalize the agreement's documentation. The shareholder meeting is now scheduled to reconvene at 4 p.m. PDT.